Turkey’s October current account deficit shrinks 38% y/y to $2bn, slightly above forecast

By bne IntelliNews December 11, 2014

The current account deficit narrowed 38.3% y/y to $2.03bn in October on the 20% y/y decline in foreign trade deficit, the Central Bank said on December 11. This is slightly higher than the market consensus deficit forecast of $1.9bn.

Foreign trade deficit was $4.65bn, representing a 20.7% y/y and 7.9% m/m decline. Exports rose 6.2% y/y to $13.8bn while imports fell 2.2% y/y to $18.4bn in October. The current account deficit fell 37% y/y to $33.1bn in January-October while annualised deficit declined to $47bn in October from $48.1bn in September.

Net foreign direct investments amounted to $416mn, financing 21% of the CA deficit while net portfolio investments stood at $1.96bn. Data of the Central Bank showed an inflow of $432mn into Turkish equities in October after an outflow of $408mn in the previous month. There was an inflow of $382mn into government debt securities that followed an outflow of $907mn from the government bond market. In the first nine months of the year, net direct investments and net portfolio investments amounted to $5.3bn and $15.4bn in January-October versus $7.2bn and 22.7bn a year ago, respectively. The Central Bank also reported an outflow of $1.9bn through the net error and omissions account in October that came on top of the $248mn of outflow in the previous month, bringing the total inflow via this account to $5.9bn in January-October versus an inflow of $1.6bn a year ago.

Banks borrowed $2.5bn on net basis in October through bond issues in international capital markets, bringing the net borrowings in ten months to $10.4bn, and official reserves recorded a net increase of $4.4bn in January-October, the Central Bank said.

The latest data showed that Turkey’s external rebalancing continued in October at a faster pace than in September when the current account deficit narrowed 32%. The declining oil prices, if continues, will help Turkey reduce its large current account deficit in the months to come. It is calculated that every $10 drop in the oil price reduces Turkey’s current account deficit by around $4.5bn. On the down side is the sluggish economic recovery in Europe, Turkey’s main export market. Geopolitical risks also put pressure on Turkish exports. The Turkish Exporters' Assembly (TIM) reported in December that Turkey's exports fell by 6.4% y/y to $12.9bn in November as sales of goods to the EU dropped 8% y/y. Exports to Iraq that fell 22.6% y/y in October dropped by another 23% y/y in November. The government's updated medium-term programme forecasts that the current account deficit will fall to $46bn at the end of 2014 from $65bn in 2013.

(USD bn) 2013 2014 y/y
CURRENT ACCOUNT -52.4 -33.1 -37%
      exports 132.5 141.0 6%
      imports 199.0 191.1 -4%
      foreign trade balance -66.5 -50.1 -25%
CAPITAL ACCOUNT -0.10 -0.05 -44%
FINANCIAL ACCOUNT -51.0 -27.3 -46%
       Net FDI -7.2 -5.3 -26%
       Net Portfolio Investment -22.7 -15.4 -32%
Source: tcmb      

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